Bristow Ent Fin Ch10

Bristow Ent Fin Ch10 - Entrepreneurial Finance For New and...

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Entrepreneurial Finance For New and Emerging Businesses Special Edition James McNeill Stancill © 2008 James McN. Stancill - All Rights Reserved
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Chapter 10 INTERMEDIATE TERM FINANCING: TERM LOANS AND PRIVATE PLACEMENTS
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3 Prior to 1990, most developing firms would get their term loans - intermediate term financing - from their bank or insurance company. But in that year, there was a “flight to quality” by the insurance companies and banks. The latter because of the “Highly leveraged transaction rule” ( HLT ). Prior to 1990, life companies had about 20% of their portfolio of loans to “ BIG ” ( b elow i nvestment g rade) companies; today it is only several percent. Today it’s “junk bond funds”. INTERMEDIATE TERM FINANCING
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4 On the next slide Prouse shows a breakdown of borrowings by type of lender. This is based on what Prouse calls “information problematic” situations: How much trouble would it be to get information from a lender? INTERMEDIATE TERM FINANCING
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5 PROUSE’S  CREDIT MARKET CHACTERISTICS
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Banks like to match short term liabilities with short term assets ; If banks make a fixed rate loan they can “swap” it for a floating rate. Insurance companies like to match their
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This note was uploaded on 02/11/2012 for the course BUAD 497 taught by Professor Degravel during the Spring '07 term at USC.

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Bristow Ent Fin Ch10 - Entrepreneurial Finance For New and...

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